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Trump's GOP wants to break up big banks

Posted on Wednesday, July 20, 2016 by Abel Norris

Trump's GOP wants to break up big banks

Republicans have called for the reinstatement of the Glass-Steagall Act in their party platform approved Monday, a last minute addition that's somewhat surprising, given the GOP is more typically associated with deregulation and the Depression-era banking regulation has been a significant part of Bernie Sanders' campaign.

A few Republicans have also called for the Glass-Steagall law to be reinstated, notably Sen. Goldman Sachs, JP Morgan, and the now-bankrupt Lehman Brothers led a gaggle of banks and their lawyers as Clinton's third-largest source of campaign cash. "They obviously didn't consult very many folks on the Financial Services Committee or folks that knowledgeable, which is too bad". Glass-Steagall advocates argue that reimplementing the law would protect taxpayers from losses associated with risky trades, while also increasing the costs of such trades for hedge funds and private equity firms that do not benefit from public subsidies.

Although the move alarmed lawmakers, however, they maintained that Trump would be a better choice for the economy and the country than his rival, former Secretary of State Hillary Clinton, who is expected to be formally nominated at the Democratic convention next week in Philadelphia.

The instability was in institutions that were not affected by the law, he said. Warren has sponsored legislation that would reinstate the law, but it hasn't advanced in a Republican-controlled Congress. Bank of America and JPMorgan have also faced proposals from shareholders and calls from securities analysts to separate business lines or shrink in size. "I am hopeful he will have a major voice".

The sharp response from Fratto and other industry figures came as Trump was rolling out his economic agenda at the second day of the Republican National Convention. "They don't know him and they don't like his policies".

"I think the chances of this happening are pretty slim".

Regardless, the fact that the Republican standard-bearer sees a political benefit in pretending to be to the left of Clinton on financial reform is noteworthy.

A draft Democratic Party platform released July 1 said the Democrats support "a variety of ways" to stop banks from posing an undue risk to the US financial system, including "an updated and modernized version of Glass-Steagall" and "breaking up too-big-to-fail financial institutions" (128 BBD, 7/5/16).

Stivers said having a background in the industry is important "but most importantly it is about demeanor, somebody that will listen and work together with the industry to find solutions that work, that don't take away choice from consumers". But Shelby and Hensarling have never supported such a measure, and neither has the overwhelming majority of the GOP caucus in Congress. Democrats have never had much use for Glass-Steagall restoration either; Warren's bill, introduced a year ago, only has 8 co-sponsors that caucus with Democrats, out of 46.

He believes that when the law was repealed, investment banks massively levered up to compete with the bigger banks, which then contributed to the financial crisis in 2008.

"I would love to markup the bill if there is time this year and go into the new presidency with a concrete direction that the House thinks is the way to go", said Hill.

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